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SAP Corporate Citizenship team supports the work of Transparency International, the leading NGO think tank on the topic of corruption. Corruption is a major detriment to market and institutional development and ultimately leads to instability, economic decline & conflict as states and governing institutions degrade & collapse. But enterprise software and good business process design has huge potential to control corruption and support institutional reform. More prosaically, this issue is a huge legal risk to business world wide due to recently strengthened legislation and prosecutorial action. The US Foreign Corrupt Practices Act (FCPA) is very actively enforced against US listed companies and recently the Siemens case in Germany has sent shock waves. Expect more of the same in the future as national regulators are challenged by bodies such as the OECD to prove that they are serious about corruption control. Recently SAP has joined a business led initiative to help develop real business strategies to manage corruption risk. The initiative is led by Transparency International (TI), the International Chamber of Commerce (ICC), UN Global Compact (UNGC) and the World Economic Forum (WEF). The initiative is called RESIST.

SAP and Alcan have been assigned a specific scenario to work up: a fee is demanded by the local government agency for technical approval of equipment.  OK, on the surface of it the situation seems harmless but in fact it can be a typical form of extortion in weakly regulated markets and it may come in the form of an unreasonable demand that threatens business continuity. The easy thing maybe to pay but this may violate regulations in the home market and encourage further deterioration of the business climate locally. So how do we manage the situation?The joint working group (TI, UNGC, WEF, ICC) suggests categorizing action as follows:

1. Demand prevention: eg. tactics relating to reduced opportunity for demand,  reduced likelihood of success, increased negative consequences for extortionists.

2. Response to Demands: eg. method of refusal, incident investigation, disclosure, reputation development, collective action.  

I would like to involve the community in this initiative and I will seek to credit the community with acknowledgment in the final publication of the collected scenarios and suggested strategies. I have a completed sample scenario if anyone would like to see a good example. *UPDATED LINK TO EXAMPLE FOUND here I will invite some experts from the working group to participate in the conversation. I am also really thrilled that SAP Chief Compliance, Melissa Lea has agreed to come along and participate in this discussion. Melissa has studied this difficult area of compliance quite closely.  I do hope you will join in on this thread and I look forward to your comments and ideas on Demand Prevention and Response to Demands for the scenario of a fee is demanded by the local government agency for technical approval of equipment.

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    1. James Farrar Post author
      Anthony

      We need to talk, we have a project underway to support the Extractive Industries Transparency Initiative:
      http://www.eitransparency.org
      It was reviewed by Harvard here: The Role of the Communication and Technology Sector in
      Economic Opportunity

      We have a co-funding agreement with GTZ and interest expressed from a number of developing countries including the Nigerian and Ghanian government. Would love to get you involved in this.

      I agree with your insights on Nigeria — I recently spoke at an EIU Roundtable with the Nigerian govt and wrote it up here: http://jamesfarrar.wordpress.com/2008/01/17/nigeria-on-the-rise/ and also here:
      http://jamesfarrar.wordpress.com/2008/01/07/oil-at-100-per-barrel-an-historic-opportunity-for-nigeria/
      It seems we have a lot we can collaborate on here.

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      1. Marilyn Pratt
        I’ve just updated the links here and have been doing some of the reading.  As soon as the document (template) is ready, I’ll post it to the wiki for all to see and comment on.
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  1. Paul Centen
    Hi James, Marilyn asked me to read your blog. Following the news related to the tax fraud issue on the tandem Germany-Liechtenstein I asked myself the question about the differentiation between corporate and personal (or call it private). In today’s local newspaper (Heidelberg vicinity) there was an article on business ethics (pdf can be uploaded).
    Not to forget WW II chemistry, Seveso, Bhopal, I feel we are still too polite with this manager skill set forcing growth on other’s back. Also politicians are afraid to loose their voters once they reflect on sanctions.
    How do we (society, corporates, people) empower people to disclose information to bring CSR forward and preventing them to be trapped in corporate communications traps? This from the opinion that employees, managers in their corporate behavior are very close to their personal roots in private life. Kind regards Paul
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    1. Jim Spath
      Paul (and James, and Marilyn, et al):  You have put your finger on a dilemma I and others face.  We are not the corporate executives who can speak or act for our companies, but we represent them, and we are charged with doing so responsibly.  Marilyn and I (along with others) have been expanding the Corporate Social Reponsibility umbrella (in the Wiki and in the Discussion Forums) to increase participation and perspective.  See my blogs “CSR and Me”, “My Carbon Footprint at Home”, and “I measured my home energy use. Now what?” for ideas on what a person can do. // Jim (“all opinions expressed are mine, not my employers”)
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  2. Marilyn Pratt
    We’ve updated the CSR Wiki with a new page that has instructions for participating in this project.
    Take a look at the RESIST Corruption Template and if you are interested in participating, simply put your Demand Prevention Tactics and your Response to Demands Actions into the comments of the wiki page.
    This project has very high visibility and provides a good opportunity to engage with sustainability thought leaders and take action around the prevention of extortion.  Make a difference, share your ideas.
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    1. Jim Spath
      Marilyn – this is great stuff, particularly if you remember the 60’s change-the-world idealism.  I will comment in the Wiki on how individuals can participate, not just how companies should act. //jim (expressing my opinions, no one else’s)
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